Novartis sells off part of Sandoz portfolio

In a deal worth up to $1bn, Novartis has agreed to sell parts of its generics drugs arm Sandoz to Aurobindo Pharma, India’s second largest drugmaker.

The move, which will see Sandoz do away with its lower margin segments of US dermatology and generic oral solid portfolios, allows the firm to re-focus its business.

Sandoz's chief executive Francis adds: “Sharpening our portfolio focus in the US allows us to devote more time and resources toward our strategy of bringing complex generics, value-added medicines and biosimilars to patients, creating higher value and opening up access to important medicines where alternatives are truly needed."

Novartis will receive £900m upfront in cash, and a potential earn out sum of $100m based on portfolio performance.

In return Aurobindo is set to receive approximately 300 products, as well as additional development projects and Sandoz’ dermatology development centre. It will also acquire five manufacturing facilities in the US, including a New-York base.

Around 750 employees will also transfer over to Aurobindo, and Sandoz’ US president Carol Lynch has said it hopes to avoid complexities by aiming for a quick yet clear transition.

Although the sell wasn’t exactly surprising after Novartis reported disappointing sales from Sandoz in the US, it was expected that the Basel-based business’ next move would be a spinout from its eye-division Alcon, which it acquired back in 2010.

It has been mulling over that idea for a while now after a review of the once-struggling eye care unit.

However, ratings agency Moody’s said that if the spin-out went ahead then Novartis would be less diversified and would be more reliant on its riskier, innovative medicines portfolio. It then downgraded Novartis from an Aa3 to A1 as a result.